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A Unified Approach to Measuring Poverty and Inequality: Theory and Practice A Unifi ed Approach to Measuring Poverty and Inequality OTHER TITLES IN THE ADePT SERIES Health Equity and Financial Protection: Streamlined Analysis with ADePT Software (2011) by Adam Wagstaff, Marcel Bilger, Zurab Sajaia, and Michael Lokshin Assessing Sector Performance and Inequality in Education: Streamlined Analysis with ADePT Software (2011) by Emilio Porta, Gustavo Arcia, Kevin Macdonald, Sergiy Radyakin, and Michael Lokshin ADePT User Guide (forthcoming) by Michael Lokshin, Zurab Sajaia, and Sergiy Radyakin For more information about Streamlined Analysis with ADePT software and publications, visit www.worldbank.org/adept. STREAMLINED ANALYSIS WITH ADePT SOFTWARE A Unifi ed Approach to Measuring Poverty and Inequality Theory and Practice James Foster Suman Seth Michael Lokshin Zurab Sajaia © 2013 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org Some rights reserved 1 2 3 4 16 15 14 13 This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 Unported license (CC BY 3.0) http://creativecommons.org/licenses/ by/3.0. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: Foster, James, Suman Seth, Michael Lokshin, and Zurab Sajaia. 2013. A Unified Approach to Measuring Poverty and Inequality: Theory and Practice. Washington, DC: World Bank. doi: 10.1596/978-0-8213-8461-9 License: Creative Commons Attribution CC BY 3.0 Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. All queries on rights and licenses should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: [email protected]. ISBN (paper): 978-0-8213-8461-9 ISBN (electronic): 978-0-8213-9864-7 DOI: 10.1596/978-0-8213-8461-9 Cover photo: Scott Wallace/World Bank (girl and child) Background image: iStockphoto.com/Olga Altunina Cover design: Kim Vilov Library of Congress Cataloging-in-Publication Data Foster, James E. (James Eric), 1955– Measuring poverty and inequality : theory and practice / by James Foster, Suman Seth, Michael Lokshin, Zurab Sajaia. pages cm Includes bibliographical references and index. ISBN 978-0-8213-8461-9 — ISBN 978-0-8213-9864-7 (electronic) 1. Poverty. 2. Equality. I. Title. HC79.P6F67 2013 339.4'6—dc23 2012050221 Contents Foreword .................................................................................................... xi Preface ....................................................................................................... xv Chapter 1 Introduction ................................................................................................ 1 The Income Variable ..........................................................................................4 The Data ..............................................................................................................4 Income Standards and Size .................................................................................5 Inequality Measures and Spread .......................................................................13 Poverty Measures and the Base of the Distribution .........................................26 Note ...................................................................................................................44 References ..........................................................................................................44 Chapter 2 Income Standards, Inequality, and Poverty ......................................... 45 Basic Concepts ..................................................................................................49 Income Standards ..............................................................................................54 Inequality Measures ...........................................................................................81 Poverty Measures .............................................................................................105 Exercises ..........................................................................................................144 Notes ................................................................................................................149 References ........................................................................................................151 v Contents Chapter 3 How to Interpret ADePT Results ......................................................... 155 Analysis at the National Level and Rural/Urban Decomposition .................157 Analysis at the Subnational Level ..................................................................170 Poverty Analysis across Other Population Subgroups ....................................183 Sensitivity Analyses ........................................................................................199 Dominance Analyses .......................................................................................207 Advanced Analysis ..........................................................................................216 Note .................................................................................................................223 Reference .........................................................................................................223 Chapter 4 Frontiers of Poverty Measurement ...................................................... 225 Ultra-Poverty ...................................................................................................225 Hybrid Poverty Lines.......................................................................................226 Categorical and Ordinal Variables .................................................................228 Chronic Poverty ..............................................................................................229 Multidimensional Poverty ...............................................................................230 Multidimensional Standards ...........................................................................234 Inequality of Opportunity ...............................................................................238 Polarization ......................................................................................................240 References ........................................................................................................241 Chapter 5 Getting Started with ADePT ................................................................. 245 Conventions Used in This Chapter ...............................................................246 Installing ADePT ............................................................................................246 Launching ADePT ..........................................................................................247 Overview of the Analysis Procedure...............................................................248 Specify Datasets ...............................................................................................249 Map Variables ..................................................................................................252 Select Tables and Graphs ...............................................................................254 Generate the Report .......................................................................................257 Examine the Output ........................................................................................258 Working with Variables ..................................................................................258 Setting Parameters ..........................................................................................264 Working with Projects ....................................................................................264 Adding Standard Errors or Frequencies to Outputs .......................................265 vi Contents Applying If-Conditions to Outputs ................................................................266
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